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Reputation or Reciprocity? An Experimental Investigation

  • Simon Gaechter
  • Armin Falk

Recent evidence highlights the importance of social norms in many economic relations. However, many of these relationships are long-term and provide repeated game incentives for performance. We experimentally investigate interaction effects of reciprocity and repeated game incentives in two treatments (one-shot and repeated) of a gift-exchange game. In both treatments we observe reciprocity, which is strengthened in the repeated game. A detailed analysis shows that in the repeated game some subjects imitate reciprocity. Thus, reciprocity and repeated game incentives reinforce each other. Observed behaviour is robust against experience. We conclude that a long-term interaction is a reciprocity-compatible contract enforcement device.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 496.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_496
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